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Summers: A Long Road Ahead

4732106While the U.S. economy is showing some "glimmers of hope," as President Obama likes to say, the end of the downward spiral is not in sight. Speaking on NBC's "Meet the Press," director of the National Economic Council Lawrence Summers said that despite mixed statistics after a period with no positive data, the economic recovery is "a long road and it is going to take time." Mr. Obama made similar comments at a speech on April 14 at Georgetown University, saying that "by no means are we out of the woods."

Summers pointed to the efforts of the Obama administration in nearly 100 days in office to get the economy back on track. Long term, the country needs a less leveraged economy, he said, with a much better regulatory financial system; a culture of savings and elimination of marketing credit in ways that addict people to it; and getting the government back to the place it had in the 1990s, when it was a contributor rather than a drain on the economy.

But, Summers cautioned, "We can't know with certainty what is going to happen next." The uncertainty is the big challenge for the Obama team. The economic problems are like a 100-year flood, and the government can't repair the levees or fill the sandbags fast enough. With stress tests, bailouts, tax relief for 95 percent of Americans, stimulus checks and emerging financial regulations, job losses continue to mount and credit is not unfrozen.

For a kicker, some of the financial players, such as Goldman Sachs, participating in the Troubled Asset Relief Program (TARP) want to give their government aid back. Summers expressed concern that the banks might revert to the practices that put the economy in jeopardy. "We don't want people to be paying back the government in ways that would put themselves right back in trouble, and leaving themselves with inadequate capital," he said.

"The central tone is trying to be proactive, anticipating problems and acting on them before they become a crisis," Summers said.